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Pension Funds

U.K. corporate pension funding deficit improves by 12.6% in September — report

The total deficit of U.K. corporate defined benefit funds fell 12.6% to £174 billion ($233 billion) in September and was down 44.6% for the 12 months ended Sept. 30, said JLT Employee Benefits.

The consultant's latest update said the funding level of these plans improved to 90% from 89% as of Aug. 31, and from 83% as of Sept. 30, 2016.

The improvement in the funding level came despite a 2.9% drop in assets to £1.56 trillion, which was more than offset by a 4% fall in liabilities to £1.74 trillion in September. Assets grew 1.7% for the year ended Sept. 30 and liabilities fell 6.2%.

For the U.K.'s 100 largest companies, the total deficit fell 18.2% to £45 billion, and dropped 56.7% over the year. The funding level improved to 94% from 93% as of Aug. 31 and 86% as of Sept. 30, 2016.

FTSE 350 companies also saw their deficits improve, to £57 billion as of Sept. 30. That's a 16.2% drop vs. Aug. 31 and a 53.7% improvement vs. Sept. 30, 2016. The funding level grew to 93% at the end of September from 92% as of Aug. 31 and 86% as of Sept. 30, 2016.

Charles Cowling, director at JLT Employee Benefits, said in a statement accompanying the data that despite a problematic political backdrop, concerns over rising inflation and the Bank of England governor warning that the central bank "cannot be expected to solve every economic problem in the U.K., the funding position of DB pension schemes is showing signs of positive improvement, after a traumatic few years."

He said the total deficit of FTSE 100 firms shows signs of heading even lower. However, actuarial valuations carried out in 2017 "are likely to show bigger deficits than in 2014 and trustees will therefore be knocking on the finance director's door asking 'more please,'" said Mr. Cowling.

Separate figures by PricewaterhouseCooper's Skyval index show the deficit of the U.K.'s about 5,800 corporate pension funds was unchanged at £460 billion at the end of September on a funding basis. The funding basis is the target used by pension fund trustees to determine company cash contributions, said PwC.